Credit score issues are some of the most popular topics in our comments section-many want to know if their FICO scores are high enough to qualify for an FHA mortgage. One reader asked recently, “(Can) i can buy a (home using) FHA or HUD at a credit score from 500 to 579? With 10% down? How much is 10%?”
This reader is referring to a recent blog post about FHA FICO score requirements which included the following:
“FHA loan rules state that borrowers with credit scores at 580 or higher are eligible for maximum financing for FHA home loans, which requires a 3.5% down payment from the borrower. For those with credit scores between 579 and 500, 10% down is required.”
The short answer to the reader question is that FICO score requirements listed in HUD 4000.1, (the FHA loan rule book for single family mortgages) are only the minimums and that higher lender standards can and often do apply. The lender’s FICO score requirements would apply above and beyond FHA loan minimums.
You may need to discuss your specific circumstances with a loan officer to see what lender standards may affect your application.
Borrowers who have FICO scores between 500 and 579 may technically be eligible for an FHA loan (albeit at the higher down payment requirement mentioned above), but lender standards may require a higher score. The lender’s standards don’t get overruled by the FHA loan minimums.
We mention this to clear up confusion over how the FHA loan process works-some believe (mistakenly) that if it’s written down in the FHA loan rule book, that’s the final say in the matter.
But often times, lender standards, state law, or other factors may have a say in how the transaction is to be carried out.
The answer to the reader question, “how much is 10%?” depends greatly on the transaction since down payment requirements are based on the adjusted value of the property. Borrowers will find help with down payment amounts by using an online mortgage calculator such as the ones found at FHA.com.
You may need to have some basic estimated dollar amounts handy, such as the estimated cost of the home, potential interest rate, state taxes, etc. depending on which type of calculator you need to use.